Shanghai index closes above 3,000 on looser margin lending controls; Hong Kong stays flat
Shanghai stocks closed above the 3,000-level for the first time in two months on Monday after policy makers loosened controls on margin lending in the equity market, while the Hong Kong market closed flat.
The mainland benchmark Shanghai Composite index jumped 2.15 per cent to 3,018.80 points, posting its seventh consecutive day of gains, while the Shenzhen Composite index advanced 2.68 per cent to 1,886.37. The tech-heavy ChiNext board jumped 2.26 per cent to 2,227.03.
The boost came after China Securities Finance, the state-backed agency that provides funding to brokerages for margin trading, said it would start offering loans again to securities firms for periods ranging from 7 days to 182 days. The agency will cut interest rates on the debt to as low as 3 per cent, according to a statement posted on its website on Friday.
Victor Au, chief operating officer at Delta Asia Financial Group, said the loosening of policy will drive positive investor sentiment in mainland markets. “The Shanghai Composite index has a high possibility of staying above the 3,000-point level with the recovery in investor sentiment,” Au said. But he warned that Chinese stock markets may face risk of downward price pressure if the rally in oil prices fails to meet expectations.
Chinese brokerages led the rally in mainland markets on Monday, with Everbright Securities and Founder Securities among 24 Shanghai-listed brokerages to jump by their 10 per cent daily limit Monday. Citic Securities recorded the highest turnover in the Shanghai market, reaching 12.47 billion yuan (HK$14.9 billion) on Monday. Its share price closed at 18.65 yuan, up by the daily limit of 10 per cent.
“It is reasonable to see a big rally in brokerages as the sector suffered a serious collapse when the China market saw its worst-performance last year,” said Au.
The turnover on the Shanghai market posted its third consecutive daily increase, jumping to 380.8 billion yuan.
CIFM Asset Management said in a new report that China’s growth stocks are expected to continue their recent rally on the back of higher market turnover.
Hong Kong stocks closed almost flat on Monday, with the Hang Seng index adding only 0.06 per cent to close at 20,684.15 following a surge in the morning session.
Hong Kong Exchanges and Clearing added 5.58 per cent to HK$185.4, reaching a monthly high. HKEx was the most heavily traded stock in the city with its turnover reaching HK$3.447 billion on Monday.
“The capital outflows from emerging markets seems to ease recently as the Fed on Wednesday surprised markets by signalling only two rate increases in 2016,” said Au. “Hong Kong and mainland China equity markets got a boost from foreign investment.”
Louis Tse Ming-kwong, director of VC Brokerage, said positive sentiment is prevailing in the market right now. “Compared to other markets, Hong Kong is still cheap. The mutual recognition scheme that allows Hong Kong and mainland-domiciled funds to sell across the border kicked off last year. These funds are now accumulating positions as they prepare to launch their products,” he said.
Tse said Chinese stocks may meet resistance as the Shanghai benchmark approaches 3,200 while Hong Kong may see resistance at 21,000.
In Asian trading on Monday, Tokyo’s Nikkei 225 lost 1.25 per cent to 16,724.81. South Korea’s Kospi Index lost 0.12 per cent to 1,989.76, while the Australian All Ordinaries index dropped 0.27 per cent to 5,224.90.